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Even though the stock market is making a comeback this year after declining last year, you can still find great stocks to buy and some bargains. Although it feels great to find a bargain, it’s not always the most important thing. Following Warren Buffett’s advice, “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”

With that in mind, I’m going to recommend two fantastic stocks to buy right now. Revolve Group (NYSE: RVLV) looks like a dirt cheap bargain, and MercadoLibre (NASDAQ: MELI) looks expensive, but it’s a top stock anyway. Let’s dig into why.

1. MercadoLibre: Incredible performance, massive opportunity

MercadoLibre is the leader in e-commerce in 18 Latin American countries, and it demonstrates high double-digit growth time and time again. It’s not slowing down, although it reached the triple digits for several consecutive quarters early in the pandemic. However, it hasn’t met the fate of similar companies whose growth skyrocketed at that time and are now shutting down infrastructure they no longer need. It just posts blowout quarter after blowout quarter. Its most recent quarter growth can be found in the chart below.

Q2 2023
Year-over-year change

$3.4 billion

Gross merchandise volume
$10.5 billion

Fintech total payment volume
$42 billion

Chart by Author. Data source: MercadoLibre 2023 second-quarter report.

Gross merchandise volume growth, a key metric for the e-commerce business, accelerated from prior quarters, and it could mean that it’s past the post-lockdown “dip” when customers were back out buying from physical stores.

MercadoLibre’s e-commerce business has momentum, and in some ways, it’s besting Amazon‘s similar business with faster delivery times — 56% of items were delivered the same or the next day in the second quarter, while 80% were delivered within 48 hours. According to Amazon, more than half of its orders were delivered the same or the next day only in 60 top metro areas for Prime members. This is a catalyst of strong future growth going forward as MercadoLibre becomes a go-to source of products for customers, increasing loyalty and generating more sales.

As well as e-commerce is doing, MercadoLibre’s fastest growth is coming from its fintech business. It originally started with MercadoPago, a service for customers without credit cards to participate in the e-commerce business since it allows customers to load their digital wallets with cash or other alternatives and use them to make digital orders. The digital payments business is now a key segment and revenue driver. As usual, the most growth came from off-platform volume, which increased by 129%. These are payments outside of the MercadoLibre platform, and there’s a huge opportunity to grow its TPV since this platform can be used for all kinds of payments. It has added many other financial services to the fintech segment, including a growing credit business.

MercadoLibre is also increasing profitability as it expands. Operating income more than doubled to $558 million in the second quarter, with a 16.3% margin, up from 9.6% last year.

The only potential drawback with MercadoLibre stock is the valuation. Shares trade at 71 times forward earnings, which is a premium price tag. However, as MercadoLibre addresses the problems its customers have in participating in e-commerce and offers solutions to take care of finances digitally, it has an enormous opportunity for the foreseeable future. Therefore, some premium is warranted. Some incredible stocks always sport a premium valuation because their opportunities and performance are strong.

2. Revolve: The future of fashion

Revolve sells fashion merchandise on its website and through its sister brand, FWRD, which features premium labels. It stands out from many other apparel sites through its massive collection and artificial intelligence (AI) systems, which power all of its operations and help it stay on top of styles and trends. It also markets itself through a vast network of celebrities and influencers that reach its millennial and Gen-Z target consumers, including creating capsule collections in partnership with popular artists and designers.

Sales were soaring prior to and early in the pandemic, but they’ve turned into declines as inflation keeps customers away from these kinds of discretionary purchases. Sales decreased 6% in the 2023 second quarter to $274 million, and net income dropped by more than half to $7.3 million.

There were still signs of a healthy business, on top of the fact that the company is still profitable. Active customers increased 14% over last year, and total orders placed were up 1%. Revolve meets a sweet spot of customers willing to spend on trendy fashion, which means that even though it’s far from a discount retailer, it attracts customers from a broad spectrum of socioeconomic levels. Combined with its robust AI capabilities, which allow it to quickly change its merchandise to match changing trends, it also makes more full-price sales. In fact, 85% of sales were at full price in 2022, leading to higher profits.

It won’t be able to match that this year, but it has been balancing its inventory to meet demand. In the second quarter, inventory was down 2% from last year, and it was the fourth consecutive quarter that the spread between inventory and sales growth narrowed.

Consider how Revolve stacks up against peers Gap (NYSE: GPS), Nordstrom (NYSE: JWN), and Urban Outfitters (NASDAQ: URBN) in terms of how it has both engaged customers, illustrated through revenue increases and how it’s grown its bottom line.

RVLV Net Income (Annual) data by YCharts

Now, look at how well it’s balancing inventory compared to similar companies. Days inventory outstanding refers to how long a product sits on the stores’ shelves (virtual, too). Not only is Revolve’s consistently lower, but it has decreased this amount over time while peers are having a tougher time moving merchandise.

GPS Days Inventory Outstanding (Annual) data by YCharts

Revolve maintains operational efficiency despite the harsh environment, but its growing popularity and strict efficiency position it to bounce back under better circumstances.

In the meantime, its stock has plummeted, down nearly 40% this year. At this price, shares trade 24 times trailing 12-month earnings, a bargain price for a stock with incredible potential. Out of the competitors mentioned above, only Urban Outfitters is cheaper, despite Revolve’s better performance. Now is a great time to grab shares before they skyrocket.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has positions in MercadoLibre. The Motley Fool has positions in and recommends, MercadoLibre, and Revolve Group. The Motley Fool has a disclosure policy.

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